Cadence guns for Synopsys with Tensilica buy

SAN FRANCISCO—EDA vendor Cadence Design Systems Inc. Monday (March 11) agreed to acquire dataplane processing IP specialist Tensilica Inc. for about $380 million in cash in a deal that would significantly expand Cadence's IP offerings and put the firm in position to compete head on with archrival Synopsys Inc. in the silicon IP business.

"It's a natural extension of [Cadence's] business," said veteran EDA analyst Gary Smith, chief analyst at Gary Smith EDA. Cadence has been "big in verification IP and now they are moving in on Synopsys' silicon IP business," Smith said.

Smith said the acquisition could also help strengthen Cadence's relationship with processor IP supplier ARM Holdings plc. "Recently, Tensilica has been getting into designs alongside ARM rather than competing with them," Smith said. "This makes them a safe play, unlike Synopsys’ buying ARC." Synopsys acquired the configurable IP technology developed by ARC International plc when Synopsys bought Virage Logic Inc. in 2010.

"Both of these acquisitions are in line with our strategy to invest in and grow the scale of our IP business," Tan said.

Tensilica had about $30 million in cash on its books at the close of 2012, Cadence said. Tensilica's 2012 revenue was about $44 million, and the firm was profitable in 2012, according to Cadence executives.

Nearly all of Tensilica's roughly 200 employees will join Cadence, including president and CEO Jack Guedj, Tan said.

In expanding through acquisitions, Cadence is following in the footsteps of Synopsys, which has in recent years become a leading force in IP. In an interview, Tan acknowledged that Cadence's future growth is largely dependent on IP sales.

"This combination will enable deeper integration between Tensilica IP and tools from cadence, resulting in faster design and improvements in power, performance and area," Tan said.

Cadence (San Jose, Calif.) said it plans to finance the Tensilica acquisition with available cash and debt. The transaction is expected to close in the second quarter, subject to closing conditions including regulatory approvals, Cadence said.

In a statement issued by Cadence, Simon Segars, ARM president, said the acquisition of Tensilica by Cadence would be a positive move for the industry. "We look forward to expanding our ongoing collaboration with Cadence to enable our customers to bring great products to market," Segars said. Related stories:

Interesting read at mobilitytechzone.com: "Tensilica Incorporation, a market leader in licensing IP core processors, recently announced the strengthening of its strategic relationship with Huawei Technologies, the Chinese multinational networking and telecommunication giant."
Market leader no less. This may put CDNS at odds with the gov't in some ways.

I think Cadence favorite song is "Opps I did it again....I overpaid to acquire another mature IP company". But who cares, their stock is up 40% the past 12 months, so from Investor perception point of view, they are doing well. When the times comes to run checks and balances...i.e. Return on Investment in 5 years, is really when the rubber has to hit the road!

I agree. Seems like Tensilica did very well for themselves. During the analyst call, Lip-Bu Tan was asked the question about why the purchase price was so much higher than Tensilica's annual revenue. Tan said "This is premium IP" and went on to say that only a handful of IP vendors can command royalties on their IP. Obviously, Tensilica is one of them.